IN RE METHIONINE ANTITRUST LITIGATION

The opinion of the court was delivered by: Charles Breyer, District Judge

MEMORANDUM AND ORDER

Plaintiff West Bend Elevator, Inc. ("West Bend"), a Wisconsin corporation, brings this price-fixing lawsuit under Wisconsin's antitrust statute. The Court previously certified the lawsuit as a class action. Now before the Court is defendants' motion to decertify the class. After carefully considering the papers filed by the parties and all the pleadings in this action, and having had the benefit of oral argument, defendants' motion to decertify the class is GRANTED.

BACKGROUND

This lawsuit arises out of an alleged 15-year conspiracy by defendants to fix the price of methionine. Defendants sell synthetic methionine in variety of forms to direct purchasers, that is, those who purchase the methionine directly from defendants. West Bend is a Wisconsin grain elevator and feed mill and also operates a hog farm. During portions of the alleged conspiracy, it purchased methionine to resell and for its own use in its hog farm operation. West Bend filed this putative class action under Wisconsin's antitrust laws in [ Page 2]

Wisconsin state court on behalf of all indirect methionine purchasers; that is, those who purchased methionine from someone other than defendants.

Defendants successfully removed the action to Wisconsin federal court and the Multi-District Litigation Panel transferred the action to this Court. See 28 U.S.C. § 1407. The Multi-District Litigation ("MDL") matters that were pending before this Court included a consolidated nation-wide class action on behalf of direct purchasers of methionine, several actions by individual opt-out direct purchasers, and this matter. The Court certified the direct purchaser class action and in August 2002 approved a $107 million settlement. All of the direct purchaser opt-out actions settled earlier this year. West Bend is the only methionine price-fixing case that is still pending.

A. West Bend's First Motion to Certify the Class

The Court denied West Bend's initial motion for class certification on the ground that plaintiff had not come forward with a "colorable method" of proving antitrust impact, otherwise known as injury in fact, on a class-wide basis. In re Methionine Antitrust Litigation, 204 F.R.D. 161, 165 (N.D. Cal. 2001). In particular, the Court held that plaintiff's expert, John M. Connor, did not consider that the proposed class included both resellers and ultimate users and that the overpriced product — methionine — is incorporated into other products. Id. at 164-65.

B. West Bend's Second Motion to Certify the Class

West Bend subsequently amended its complaint to bring its claims on behalf of a much narrower class, namely, those who indirectly purchased methionine from defendants in Wisconsin for end use as an animal feed additive; in other words, only those Wisconsin indirect purchasers who did not resell the methionine. West Bend defined the proposed class as follows:

All persons and entities . . . who purchased
methionine in the State of Wisconsin for end use as an
animal feed additive (excluding pet feeds for dogs,
cats, birds, and fish) indirectly from any of the
defendants at any time during the period January 1,
1985 to the end of 1998.

After the parties engaged in further class certification discovery, West Bend moved for certification of this narrower class. [ Page 3]

The motion's primary issue was again whether West Bend would be able to prove on a class-wide basis that the class members were injured by the alleged price-fixing conspiracy. To prove that each class member was actually injured, West Bend must demonstrate that the "overcharge" was passed on to each class member, that is, that the methionine reseller who purchased methionine (either directly or indirectly) from defendants paid an inflated price for the methionine and then "passed on" that overcharge to the class member. The Court assumed, for the purpose of the motion, that West Bend could prove the direct purchasers were overcharged for methionine, as well the approximate amount of the overcharge over time. The issue presented was whether West Bend could prove on a class-wide basis that the overcharge was passed on through the various distribution channels to the indirect purchaser end users.

In support of its renewed motion to certify, West Bend relied on a new expert, Dr. Keith Leffler. Dr. Leffler's theory of antitrust impact was, in brief, that given the longevity of the conspiracy, it is common sense that the methionine end users were injured. He therefore proposed comparing the price of methionine products before the conspiracy (pre-1985) to shortly after the conspiracy began to measure the impact of the conspiracy. Any end user during the 15-year class period would be impacted by the conspiracy regardless of whether at any given time a reseller might raise the price of the methionine-containing product for some reason rather than an overcharge; the price paid by the end user would still be higher than it would have been absent the conspiracy because the whole price structure would have been raised because of the conspiracy.

Dr. Leffler proposed to calculate the overcharge pass-on rate for the class using multiple regression analysis. He testified that he would start with the prices paid by end users for methionine-containing products, "regress out" most of the independent factors that might have influenced the price to end users (labor costs, price of other ...

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